Leading High Technology Consortium Converge, Inc. to Acquire NECX from VerticalNet
Converge gains global trading volume and services, adopts VerticalNet trading software
Cupertino, Calif., - Dec. 19, 2000 -- Converge, Inc. (formerly known as eHITEX), the leading high technology
marketplace, and VerticalNet, Inc., the Internet's leading e-business enabler, announced a definitive agreement for
Converge to acquire NECX, a wholly-owned subsidiary of VerticalNet. NECX operates a global trading exchange
that matches buyers and sellers of electronic components and computer systems, and trades in excess of $1 billion
annually in North America, Asia and Europe. Converge also announced that it has chosen VerticalNet Solutions, a
division of VerticalNet, to provide the technology backbone for its trading operations. As a result of the acquisition
agreement, VerticalNet will receive a 19.9% equity interest in Converge and a seat on its Board. The companies
expect the acquisition to close during the first quarter of 2001.
"The acquisition of NECX establishes Converge as the global trading leader, making markets in over 180 product
families, with logistics and operational capability to buy, sell and move products around the world," stated Robert
Lewis, CEO of Converge, Inc. "NECX brings 20 years of domain expertise and is a trusted intermediary for the
thousands of high technology companies worldwide. The commitment of our founders, the recent delivery of our first
set of collaboration tools and the addition of NECX's on-line trading capability and infrastructure moves us into an
era of true value creation for companies throughout our industry."
Converge was founded in May, 2000 by 15 leading high technology OEMs, contract manufacturers, component
manufacturers and distributors to deliver supply-chain efficiencies using Internet technology. "This industry
depends on the collaboration of hundreds of companies to bring high-value products to market," explained Lewis.
"Our mission is to reduce our founders' $200 billion annual cost of direct materials by five to 10 percent over the
next three years, using a straightforward approach - build deeply liquid markets for direct goods and services, offer
new collaboration tools to improve efficiency and operate a confidential, trusted environment."
"Our equity ownership in Converge enables VerticalNet and its shareholders to continue to benefit from our
leadership position in the electronics component marketplace," said Joe Galli, CEO of VerticalNet. "In addition, our
agreement to provide Converge with our direct material procurement technology securely positions VerticalNet
Solutions as the emerging leader in this high-growth sector and accelerates our go-to-market initiatives. This will
sharpen our focus on VerticalNet Solutions and on VerticalNet Markets, our strategic business unit that operates
58 industry-specific marketplaces,"continued Galli. "Focusing on these two complementary businesses will enable
VerticalNet to continue our rapid growth trajectory while driving us toward profitability."
Carly Fiorina, Chairman, President and CEO of Hewlett-Packard Co. commented, "The founders of Converge came
together to transform the high-technology industry by wringing out the inefficiencies in manufacturing and supply
chain management. Since beginning this marketplace, Converge has maintained an unmatched leadership position.
The acquisition of NECX is significant for the industry, because it offers members a critical mass of participants and
volume in a single exchange."
In a separate agreement, Converge has entered into a three-year software licensing and professional services
contract with VerticalNet, valued at $107.5 million, whereby the VerticalNet Solutions platform will serve as the
technical backbone for Converge's trading operations. Today's agreement with Converge advances VerticalNet's
position as the leading software provider in the direct material procurement space. An additional component of the
agreement includes a commitment to link Converge with each of the fourteen technology-focused verticals in
VerticalNet Markets, thus creating a "linked web" of content, community, and commerce between VerticalNet and
Converge.
According to Lewis, "An important element of our interest in VerticalNet Solutions technology was their successful
implementation of their solution at NECX. VerticalNet Solutions has created a best-of-breed trading platform that
meets the requirements of direct procurement. We are pleased to announce that Converge will license this
technology and continue to work with VerticalNet to enhance and extend their platform."
Lehman Brothers Senior Research Analyst Neil Herman said: "The winner in direct procurement will be the winner in
procurement overall. The direct procurement market is much larger than indirect and the complexity of the problem
is much broader-requiring deep integration into the industry value chain. Given the complexity of direct
procurement in electronics, the player who solves this problem is poised to address the issues of any industry."
Tom Berquist, leading Internet industry analyst with Goldman Sachs said: "This confirms our view that industry-led
exchanges will emerge as viable businesses and evolve into industry operating platforms that serve the trading and
collaboration needs of specific supply chains. We continue to be impressed with the speed at which Converge is
assembling the necessary assets to establish itself as a leading example of this emerging business model."
Larry Marshall, President and CEO of NECX said: "The acquisition represents a real win for our employees and our
customers. It will allow us to continue to aggressively build out our international capabilities and enable us to offer
a broader set of services to our customers. We have long believed that the market would consolidate around leaders
who could deliver collaboration services, business services such as logistics and robust trade capabilities. We look
forward to applying our deep domain skills and innovative systems to accelerate the success of Converge."
As a joint venture partner with VerticalNet in NECX Asia, Sumitomo Corporation, a major integrated trading house,
will join the 15 founders of Converge as a shareholder, expanding the commitment of Asia-based companies to
Converge.
Atsushi Nishijo, Managing Director, Sumitomo Corporation, said "As a global trading company, we try to enhance
the supply of parts and fulfillment services worldwide, most especially in Asia. We are pleased to see this next step
in the B2B model, and expect NECX to add to Converge's strong momentum throughout Asia."
VerticalNet CEO Joe Galli will become a member of the Converge Board of Directors and Sumitomo will take an
advisory board seat.
VerticalNet will be hosting a conference call for financial analysts and others scheduled for today at 5:00 p.m. EST.
To participate in the call dial 1 877-917-3618 (International 712-271-0851), pass code - VerticalNet, speaker -
Joe Galli. A 72 hr. replay will be available by dialing 1-888-568-0647 (International 402-998-1535). The
conference call will also be Webcast "live" at: www.vcall.com
About Converge, Inc.
Converge (http://www.converge.com ) is the independent online marketplace where high-technology industry buyers
and sellers connect, collaborate and transact to increase supply-chain efficiencies. Converge (formerly known as
eHITEX) received $100 million in funding in June, 2000 from its founders: Agilent Technologies (NYSE: A), AMD
(NYSE: AMD), Canon (NYSE: CAJ), Compaq (NYSE: CPQ), Gateway (NYSE: GTW), Hitachi (NYSE: HIT),
Hewlett-Packard (NYSE: HWP), NEC (NASDAQ: NIPNY), Quantum (NYSE: DSS), Samsung Electronics (OTC:
SSNIF), SCI Systems (NYSE: SCI), Solectron (NYSE: SLR), Synnex (privately held), Tatung (TAI: 2371.TW) and
Western Digital (NYSE: WDC). For more information about Converge, please call (877) 693-5694 or (310)
231-6958 (outside US), or send inquiry via email to: info@converge.com
About VerticalNet, Inc.
VerticalNet, Inc. (Nasdaq: VERT) (www.verticalnet.com), the Internet's leading business-to-business e-commerce
enabler, provides end-to-end e-commerce solutions that are targeted at distinct business segments through its
strategic business units - VerticalNet Markets and VerticalNet Solutions. VerticalNet Markets provides value to
buyers and suppliers by offering trade relevant content, marketplaces, and enablement services through its 58
industry-specific VerticalNet® Marketplaces. VerticalNet Solutions delivers the most comprehensive digital
marketplace solutions available to industry alliances, global 2000 enterprises, Net market makers, VerticalNet
Markets and VerticalNet Exchanges. VerticalNet International leverages the Company's strategic business units
to create global Internet B2B marketplaces, offering products and services internationally and partnering with
companies that have strong local presence and domain expertise.
About NECX
Based in Peabody, MA, NECX established the first and largest open-market trading exchange for the purchase and
sale of electronic components, computer products and networking equipment. NECX provides a high degree of
market liquidity by aggregating supply and demand from thousands of component, original equipment and contract
manufacturers; as well as distributors and resellers. The Exchange provides comprehensive services such as
procurement and inventory management, trading, financial settlement, as well as global logistics and quality
assurance. In addition to its domestic operations, NECX has Asia-Pacific operations in Singapore and European
operations in Galway, Ireland and Stockholm, Sweden.
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